The next few months will be marked by change bold and unclear in the allocation of energy subsidies. The government is about to launch a plan that would have a significant impact on family incomes on the one hand and on public finances on the other. The decision is reduce subsidies to the minimum possible and there is no way to do this without paying much more for the energy we consume.
This initiative is addressed no macroeconomic stabilization plan and in a context in which energy policy in general is still adrift and tariff policy in particular is being adapted to the new schemes that are emerging. The uncertainty, one month before its possible application, is high.
Today there are two main obstacles, one of which is self-made, that the Government will have to resolve in the coming months if it wants to have a chance of success in energy policy. On the one hand, the phenomenal fare arrears in 2 out of 3 homes in the country which consume more than 30% of energy and which continue to occupy a significant share of public accounts. And, on the other hand, what is even more challenging, the implementation of a new subsidy system It is inexplicably complex. and this can undermine efforts to recompose rates.
The new subsidy regime
The government has announced a change in energy subsidy allocation schemes. Instead of focusing massively on supply, they will focus on demand, i.e. users. This approach it’s rightalthough it can cause problems.
The main parameters for assigning them are mostly known. To identify users who need help The incomes and assets of approximately 15 million families will be taken, but in the use of Basic energy basket (CBE), which represents a minimum requirement for electricity and gas in homes and bio-environmental zoning.
The government’s proposed subsidy system is overly complex and has not yet been clearly explained, not even in a public hearing. Practically, There will be a different subsidy for each house in the country and, almost certainly, the population will have little knowledge of it how much you pay and how much help you get to meet your electricity and gas bills.
It’s a system innovative which may have some shortcomings in its effective implementation and which has no significant precedent in the world. Argentina has almost half of its families below the poverty line, is experiencing a marked recession and does not have a comprehensive stabilization plan. In this context the new subsidy schemes are presented.
Among the details is the use of “10% criterion” as a maximum weight of energy expenditure on the salary to assign subsidies and the possibility of incorporating a direct transfer system to the user.
The first point is based on considering “energy poor” families as those who allocate more than 10% of their income to energy goods and services. This is a global definition and, among other things, with extensive criticism.
The second point is the possibility that the user receives a transfer to his current account as an energy contribution which would replace the discount on the bill and would constitute a serious risk for the provision of the service if these funds were freely available. . This risk is due to the high probability of default values.
On the other hand, in a country with high inflation, invoice values are anecdotal. However, the weight they have on income is not. In this sense, the weight of energy costs on the average salary was around 4.5% in the years of convertibility, when there were no subsidies.
For this reason, the fact of setting a threshold at 10% of income to calculate the subsidy reveals a significant socio-economic context, namely that in Vaca Muerta Argentina, with real wages declining in the last four years, The real costs of energy at the home level are increasingly difficult for its inhabitants to face.
Rate increases
In the month of February for 2 out of 3 families Over 92% of the cost of residential energy was covered by state contributions.
On the other hand, the government has decided that starting from February 1st, small industries and businesses will no longer receive subsidies on their electricity bills and will start paying full cost from the service.
This implies an increase 178% and 276% in the price of energy for these users, which will have more than its correlation in the final bills if any increases in transport and distribution tariffs are added.
In the case of residential users, the fate will be defined when it is explained which subsidy will correspond to each family unit. The maximum scenario for average families This is an eleven-fold increase in the price they pay for energy.more than 1,000%, to cover costs without receiving subsidies.
Furthermore, The process of updating gas bills has been suspended until April.
For what is to come, attention must focus on the level and not on the change in electricity and gas bills. Because although these services account for 3.5% of the price index, their impact on inflation is moderate, but the distributional effects are not.
Experience indicates that the increase in energy prices have a greater impact on the lowest income deciles. That is, it affects those who have less and more. For this reason, even with tolerable increases, tariff adjustments will have an unequal distributional impact if the issue is not addressed in an appropriate manner. simple, transparent and effective.
Source: Clarin
